The recent ‘Thompson Reuters 100 Global Innovators Study’ made some interesting reading. It made me think about how innovation principles from some seemingly unrelated businesses are interrelated, such as cars and fintech.
Of the 100 firms in the Survey, 10 were from the automotive industry and I considered three background themes that supported the innovation claim. The first was around patents. No real surprise there as patents can turn great ideas into commercial successes. Look at the technological advances in hybrid and full electric power cars like Tesla that, initially, dominated the patent space in the sector. The floor to screen revolution that resulted in the huge growth of fintech firms was driven by the Wagner patent. (As a sign of the times, Tesla dropped all patent protection and made their patents open source, whereas in fintech some firms used their patent IP in a more commercially robust fashion, as some readers will recall.)
Brand perception followed as a key driver of innovation uptake. In just a very short period of time, Uber has transformed the act of calling a taxi into a brand based on the technology of mobile phones, satellites and credit card payments and entered the daily lexicon of the millennials. Another recent report by Different Spin suggested that that this 19-34 age group would buy cars in the future (JD Power believes the opposite) but for different reasons and needs and, importantly, motivated by the need to embrace smart technology (green or just pain clever) and the brand behind the product or service. Google’s investment in global satellite services, technology and self-drive cars underlines the suggestion. The Google brand, like Apple, has an almost mesmeric effect on the purchasing power of brand-influenced followers, so why not buy into the Google transportation view of the future?
So what’s that got to do with fintech? A lot, actually. Most bloggers or opinion makers in this space inevitably talk about how consumer-based technology is moving into financial technologies, and nearly always mention Tesla, Uber and Google as examples. However, when you look at the products and services of many fintech firms, the differences between evolution and innovation start to become apparent.
To innovate means to challenge an old order and come up with a product or service that, fundamentally, offers change in how a task or product is completed, delivered and/or paid for. Tesla, Uber and Google (cars) certainly do that. But to do the same in fintech means starting from scratch with an idea of doing things differently, rather than merely taking an evolutionary approach which, typically, indicates a ‘follower’ mentality and lower appetite to risk or failure. In many areas of technology in the financial markets, there is often a dominant vendor or perhaps just two or three. Such market domination can be a mixed blessing to a start-up. On the one hand, new innovation can be seen as a much awaited and refreshing alternative for the customers, and on the other hand, an annoying disruptive moment for the dominant legacy suppliers. The word “disruptive” is used a lot and often out of context. New players don’t want to disrupt the customer’s business models per se; that is arrogant and dangerous. They want to disrupt the competitive landscape and offer an alternative to the status quo for the buyers, who can then adopt a new innovative design should they see the benefits.
In any mature, competitive industry, products and services evolve as a natural pathway to bring improvements to the consumer. However, in many cases, such evolution (which in itself is a great thing and I’m not knocking it) is put forward as innovation, which it clearly is not. For example, is the addition of a couple of AA batteries sitting alongside a petrol V8 engine really an innovative hybrid design? No. Perhaps it is evolution in reaction to the competition delivering real innovation and not wanting to miss the boat? In fintech, is a website ad showing an ancient legacy system screen superimposed on a Chrome browser (its true, I saw one the other day) really innovation? Is an outsource deal really a ‘utility’ or are they just the same old product or service but dressed up in new jargon?
The uptake and success of innovative ideas into reality depend on many things. Be it the automotive industry or fintech, a crucial factor is the appetite of the buyer for a new way to solve an existing problem. Whether it is operating more efficiently, reducing costs or finding a better way to use resources, what customers want are tools to transform a business using innovation, not ‘dressed up’ legacy services that have evolved over decades.
I’d wager that in the next few years, the automotive and transport sectors will continue to change and innovate in response to the pressures of climate change, infrastructure and sheer volume of people and traffic. The same will happen in fintech as firms start to see that there are alternatives in the marketplace that can transform certain functions rather than be forced to stick with old clumsy business tools and models that are pretending to be something they are not. I’m not sure I would ever trust a car that drives itself. I’d rather use Uber!
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